As I recall, the bet was that Pirate would payout as he had promised. A post-default payout is completely different from what he promised and vastly inferior to it. There might be some wiggle room there that will require a close reading of the terms of the bet and the post referenced in it. (For the record, this ambiguity is one of the main reasons I didn't take Matthew's bet. Well, that and the whole thing about not betting money you can't afford to lose.)

We'll have to work this all out once we know exactly what winds up happening.

I am shocked.

Amazingly, you can have both. You can have people who are evil masterminds with respect to those they solicit investments from and hapless simpletons with respect to those they pay the money to. It's actually not an uncommon characteristic of Ponzi schemes.

It's the flipside of the fact that you will find both arguments that "Everyone knew it was a Ponzi scheme, so people who lost money weren't really scammed" and "We still don't know it's a Ponzi". You will even see these two completely contradictory arguments made by the same people within a few minutes.

The basic psychology is that on a rational level, you know that it is almost certainly a Ponzi. But you still believe irrationally that if you invest you will make money, likely because you think it's still early. So you act on the belief, that you really don't have, that you don't "really know" that it's a Ponzi "for sure". You convince yourself the on-paper profits you will never withdraw are real, so you start to believe that you are doing well and that convincing others to join will actually help them. And, of course, it will help you. Then you start using pressure and deception to solicit others, telling yourself it's to help them, but of course (coincidentally) it also helps you. However, you are still a sucker falling for a Ponzi scheme.

You really are both a hapless simpleton and an evil mastermind at the same time. Amazing but true.

Consider a PPT operator who says the equivalent of, "Yeah, I guess I knew it was probably a Ponzi scheme, but I still figured people could get in early enough that they'd still make money." Simpleton or mastermind?

There is no "right" to spend your money hiring someone to steal money from others and give it to you. There is no "right" to hire a hitman.

If some shady looking guy on the street corner offers you a brand new flat screen television with a retail value of $800 for $50 cash, do you have a "right" to think "it's probably stolen, but what the hell, that's a risk I'm willing to take" and buy and keep the television? And while people are yelling at you "it's stolen", do you have a "right" to think, "Well, probably. But hey, maybe I'll wind up getting to keep it. And there's a non-zero chance it's not stolen and they're all wrong".

If you're going to buy cheap televisions from people on the street, then you have to learn how to spot a television that's likely stolen. Otherwise, you can and should be held responsible if the television turns out to be stolen and you ignored all the obvious signs. If you want to phrase it that way, then yes, only people who know how to spot the signs of obviously stolen property "have the right" to buy and keep cheap televisions from shady characters on the street.

No, that's not what I said. I didn't say that just encouraging people to invest in Pirate or just investing in Pirate makes someone a scammer. I try to be very precise in my words, but sometimes I fail. That's not what I'm saying.

I agree.

I have no interest in putting scammer tags anywhere or censoring anyone. However, the people who scammed other people need to recognize and accept that this is what they did and figure out where they went wrong and how to make sure it never happens again. The community can either learn from these things or repeat them endlessly. I care which of those two things happens. I'm not trying to punish anyone.

If the general response was, "You're right, I'm sorry. My desire to get rich quick and my failure to consider the fact that I was causing harm to others led me to make a mistake from which I will do my best to learn as much as possible.", I wouldn't have had to say another word.

None of these require borrowing funds at way above fiat market rates over anything but the very shortest time frames. None of these require taking the huge exchange rate risks that Pirate takes by having debt denominated in an unstable currency. None of these work if your cash flow rate is forced by these kinds of exponentially increasing interest payments. Basically, if you can afford to borrow money at 3,000+%, your first priority would be paying down that debt.

The idea that he had some business that was so profitable that paying 3,000% was doable translates into an argument that Pirate had so much money, he could afford to needlessly give it away to people. And the people he picked to be the beneficiaries, for some reason, are people who would invest in something that looks exactly like a Ponzi scheme.

If you put your keys in your desk drawer, there's always a possibility someone moved them. Normally, we ignore this possibility because the odds of it happening are low and the affect it has is small. However, if my life depended on the keys being there, I'd probably check them. For unlikely events, you can assign a rough probability and ignore them unless you have some situation where their affect is dramatic.

If I had to assign a probability to Pirate being something other than a Ponzi scheme, I'd make it less than 1%. Unless I'm dealing with something that has an affect by more than a factor of 100+, I can ignore this possibility. If I was going to make some decision where I'd be killed if Pirate wasn't running a Ponzi scheme, then I'd have to consider the possibility that he's not. I have yet to encounter a situation where I can't ignore that possibility.

Please, if I'm wrong, show me where I'm wrong. But I reject the idea that someone should refrain from making a correct, valid, rational argument because the consequences of the argument are unpleasant.

As for a "destructive attitude", there is something here that desperately needs to be destroyed. And if "I did nothing wrong" is the attitude that prevails, we'll have learned nothing from this tragedy.

Seriously? You're going to argue both that it might not be a Ponzi and that everyone knew it was a Ponzi? That both arguments are even superficially plausible demonstrates that it's a fraudulent scheme.

That was me.

I'm with you on that one.

I can't follow this reasoning at all.

Say I promise you a 10% weekly return if you lend me $500. I have no intention of paying you back. I am trying to scam you.

You say, "I won't have $500 until payday. But if you buy me lunch today, I'll lend you the $500."

If I buy you lunch, now my $500 loan scam, that I still fully intend to carry out, isn't a scam because you might not lend me the $500?

No, not every scam is a sure thing. Otherwise, nothing is a scam because someone might steal the money you scammed.

The operative question is this one: Did anyone invest knowing that this scheme was indistinguishable from one in which interest payments to earlier investors come from later investors and no (or insignificant) legitimate investment actually takes place?

And, by the way, several people have admitted that they thought it was a Ponzi but invested anyway. Necessarily, they expected their payments to come from others who joined later.

We all did exactly what you just did. We considered it, and then rejected it as completely implausible.

But even so, it doesn't matter. If something is indistinguishable from a Ponzi, and most likely a Ponzi, you should treat it like a Ponzi. If you have a gun that looks like it's loaded, you should probably treat it like it's loaded.

Are you trolling now? Or are you seriously saying that you need me to provide evidence that Pirate is indistinguishable from a Ponzi scheme? You know what Pirate said, right. You know what Ponzi schemes are, right? If you think they're distinguishable, why not just tell me what distinguishes them?

I'm arguing that something is absent that would be trivially identifiable if it existed. If you want to maintain that it exists, just point it out.

I mean, I can do a point by point comparison of what we know about Pirate and what we know about Ponzi schemes, but I've already done that at least five times. I don't see the point in doing it again.

Honestly, I think you've switched to trolling at this point. Or you are very seriously in denial.

This is not about risk. Risk is the chance that you'll lose the spin of the roulette wheel. This is about the casino planting a magnet under the roulette wheel.

When you hire someone to clean your house and he steals your jewelery, people don't say that this was a risk you accepted when you hired someone to clean your house and that you knew a house cleaner might steal.

When you are willfully blind to how you are being paid an extraordinary amount of money, it is unearned.

This is not about gambling. Gambling is when you play roulette. This is about the casino planting a magnet under the roulette wheel. There is a massive difference between gambling and fraud.

When you pay a deposit to buy a car from a dealer, there's a chance the dealer will run off with your deposit. But we don't refer to taking this risk as "gambling".

Do you really think it matters whether people knew that this was a Ponzi scheme or wondered precisely what type of illegitimate investment it was?

The argument that it must be a Ponzi scheme is complex and nuanced. But the argument that it is indistinguishable from a Ponzi scheme is trivial.

Rational people should treat a car the same way they treat something indistinguishable from a car. So as far as culpability for actions goes, it makes no difference.

Say I buy some Pirate debt from Jack. I do *not* buy the rights to any decrease in value to date. I cannot sell you a right I do not have. Without the pedigree to the debt, you really won't know what you're buying. But I guess that's your problem.

It depends how similar they need to be. There is certainly a history of partial recoveries in Ponzi schemes. This would be the first significant Bitcoin Ponzi scheme, so we're in uncharted territory.

Okay, that's good enough for me. If you are, then your claiming you're not here would be fraud and probably sufficient to undo the sale anyway.

You are still thinking that this is about the relationship between the PPT operators and the people who paid them money. It is not. It is about what they paid Pirate to do.

If I ask for donations to hire a hitman to kill my boss, I'm not ripping off my investors if I actually use the money to hire a hitman to kill my boss. The issue is what I paid the hitman to do. What did the PPT operators pay Pirate to do?

It makes no difference. Even if you think that Pirate wasn't a Ponzi, his business is still indistinguishable from a Ponzi. So this is some kind of "essence" or "omniscience" argument. ("You can't prove there's no possible way I'm right, even though all the evidence suggests that I'm wrong.") If I shoot at you with a gun I loaded yesterday, having no reason to believe anyone unloaded it, can I somehow escape responsibility because there was some chance someone unloaded the gun before I aimed it at you? Of course not. It's still wrong because I have no reason to believe the gun is unloaded and every reason to believe it's loaded. The standard for moral judgment is not a hypothetical being with perfect knowledge.

If there is no way to distinguish between the two then there is no difference with respect to the culpability of the investors for the two.

Say there are a bunch of boxes. Some are empty and some contain children. There is no way to distinguish which is which. Should you shoot at the boxes?

I hope you don't take this as rude, but you really demonstrating how Ponzi schemes and the desire for a quick, unearned buck make people throw reason to the wind.

Wow, this is like arguing against evolution denialists who continue to insist that no matter how much argument and evidence you produce, until and unless you provide the unspecified evidence they insist on, nothing has been shown.

For about the fifteenth time: Every legitimate investment provides investors with some way to know that their funds were actually legitimately invested in something that has a reasonable expectation of making a profit and provides them some way to know that claimed profits or losses were actually the result of legitimate investment activity and not manufactured. It provides an assessment of the risk factors that affect the investment and some way for the investor to at least begin to assess the level of risk.

You mean you still don't?! Seriously?

It makes it easier to find in the dark.

I don't want this to happen again. I want the community to learn the maximum amount possible from this mess. And I see significant efforts to prevent the community from learning a lesson.

I can very clearly say that all contributions to the bitcoin address in my signature will be used to hire a hitman to kill my boss. That doesn't absolve me of responsibility for hiring a hitman to kill my boss. The issue is not what Pirate did with the money or how he induced people to give him the money -- the issue is what he paid Pirate to do.

For those who argue the PPT operators did nothing wrong, should they do it again next time?

Again, the issue is what he paid Pirate to do. It has nothing to do with the service he provided or whether he was honest or lied about what he was doing. He knowingly paid Pirate to fraudulently transfer to him money that he knew was obtained from others on the false promise that it would be legitimately invested -- a transfer he knew was not in fact a legitimate investment.

My problem with that is that he knowingly participated in a scam, drew others into that scam, and attempted to profit from it. And if he agrees with you, he still sees nothing wrong with that.

So which part did you think wasn't exactly accurate? Read over what I said very carefully. I think you were thinking I said something I actually didn't say. For example, purporting to tell investors where their money is going is perfectly consistent with not giving investors any way to know where their money is going.